For-profit colleges face more scrutiny in new report

By Dennis Carter, Assistant Editor

August 5th, 2010

Enrollment at for-profit colleges has climbed to 1.8 million in recent years.

A government report released Aug. 4 details “fraudulent” practices among recruiters for some for-profit colleges, and public criticism of the popular institutions has mounted as recent statistics show that at least one for-profit university received $1 billion in federal Pell Grants during the 2009-10 academic year.

Investigators from the Government Accountability Office (GAO) posed as college students and found that four out of 15 institutions they examined “encouraged fraudulent practices” to secure federal student loans, and representatives from all 15 colleges “made deceptive or otherwise questionable statements” to the undercover students, according to a report published on the GAO’s web site.

The extensive report is the latest in a string of negative publicity for for-profit schools, which include industry giants such as the University of Phoenix, Kaplan University, and DeVry University.

Manny Rivera, a University of Phoenix spokesman, said the school takes the GAO report “very seriously” and has launched an internal investigation after reading the report’s findings.

“We have strict policies in place to protect students during the enrollment process and throughout their tenure with the university, and when we discover any violation of this policy, we take immediate and decisive disciplinary action up to, and including, termination of the employees involved,” Rivera said.

Responding to consistent complaints about these colleges’ tactics, the U.S. Education Department (ED) unveiled regulations that would cut off federal aid to for-profit college programs–including many of the nation’s largest online schools–if too many of their students default on loans or don’t earn enough after graduation to repay them.

ED statistics show that these schools’ aggressive and misleading recruiting practices have helped institutions bring in hundreds of millions or even billions of dollars in federally-subsidized student aid, including Pell Grants.

The University of Phoenix, with more than 200 locations and 476,000 students nationwide, took in slightly more than $1 billion in Pell Grants during the 2009-10 school year, according to ED statistics. Kaplan University, a school with 66,000 students, received $211 million in Pell Grants, and DeVry received $207 million. Ashford University took in $162 million in Pell Grants last academic year.

For-profit college enrollment has grown from 365,000 to more than 1.8 million in recent years, according to the GAO report. The industry received $20 billion in federal student loans last year, including $4 billion from the Pell Grant program.

Four of the GAO investigators who went undercover and applied to for-profit schools were encouraged by college personnel “to falsify their financial aid forms to qualify for federal aid,” according to the report. In one case, a college recruiter encouraged the undercover applicant to hide $250,000 in savings so he would be eligible for federal student aid.